An optimal early warning system for currency crises under model uncertainty

Mamdouh Abdelmoula M. Abdelsalam, Hany Abdel-Latif

This paper assesses several early warning (EWS) models of financial crises to propose a model that can predict the incidence of a currency crisis in developing countries. For this purpose, we employ the equal weighting (EW) and dynamic model averaging (DMA) approaches to combine forecast from individual models allowing for time-varying weights. Taking Egypt as a case study and focusing only on currency crises, our findings show that combined forecast (EW- and DMA-based EWS), to account for uncertainty, perform better than other competing models in both in-sample and out-of-sample forecasts.

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Year of publication:	2020
Authors:	Abdelsalam, Mamdouh Abdelmoula Mohamed ; Abdel-Latif, Hany
Subject:	Financial crises \| Currency crises \| Early warning \| Uncertainty \| Egypt \| Frühwarnsystem \| Early warning system \| Währungskrise \| Currency crisis \| Finanzkrise \| Financial crisis \| Ägypten \| Risiko \| Risk \| Bankenkrise \| Banking crisis \| Welt \| World \| Theorie \| Theory
Description of contents:	Description [doi.org]

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